Management

The new JCT Standard Building Contract explained

The Joint Contracts Tribunal (the JCT) has now updated its standard building contract. Wright Hassall legal director Stuart Thwaites picks out key changes.

Stuart Thwaites

Articles

There are no major changes. The CDM coordinator has been changed to the “Principal Designer” to reflect the CDM regulations from 2015.

The reference to the Site Waste Management Plans Regulations has been deleted from Article 6 as those regulations were revoked in 2013.

Article 8 now has the updated version of the Construction Industry Model Arbitration Rules.

Contract particulars

There is now reference to a performance bond and parent company guarantee to be provided by the contractor.

One significant change, which is addressed further below, is the introduction of the concept of “Interim Valuation Dates”.

There is now reference to the BIM Protocol, and to reflect the growing use of third party rights, there is now greater scope for the granting of these rights instead of collateral warranties.

Conditions

Carrying out the works

The contractor has to notify the employer of any discrepancy/divergence between the contractor’s proposals and/or other contractor’s design documents. This is in addition to notifying the employer of any discrepancy or divergence within its own contractor’s proposals.

There is now also provision for the BIM Protocol to apply.

The changed payment provisions

This section probably has the most important changes. A key concept introduced by the new edition is that of “Interim Valuation Dates” (IVDs). These are meant to apply throughout the supply chain. The aim is to ensure fair payment throughout the contractual chain. Whether that aim is achieved remains to be seen.

The monthly payment cycle now continues after practical completion, and continues up to the due date of the final payment.

There is a new procedure for the assessment of loss and expense, the aim being to avoid problems where notification is made some significant time after the event. The contractor has to notify the architect/contract administrator as soon as the likely effect of a relevant matter on progress, or in relation to loss and/or expense, is reasonably apparent to them.

However, the new provisions stop short of making such notification a “condition precedent” to payment/time. That is, a failure to notify would be a breach of contract, but would not in itself automatically prevent the contractor from being entitled to time/money.

In addition, the contractor has to notify its initial assessment of the loss and/or expense incurred, and any further amounts likely to be incurred, at the same time as it notifies the impact on progress and the extent of any loss and/or expense, or as soon as reasonably practicable thereafter. Furthermore, the contractor has to keep that assessment updated in such form and manner as the architect/contract administrator may require.

The architect/contract administrator then has to notify the contractor of the ascertained amount of the loss and/or expense incurred within 28 days of receiving the above initial assessment, and within 14 days of receiving each subsequent update.

The first IVD should be set out in the contract particulars. The further IVDs will then be the same date in each month thereafter. If for some reason the parties do not identify the first IVD, then the default date is one month after the date of possession.

The IVDs are then used to work out the due dates for payment. The monthly due date in terms of interim payments is seven days after the relevant IVD. At any time up to the relevant IVD, the contractor can make a payment application. This, however, is not compulsory.

Control of the works

Under clause 3.12, any instruction given by the architect/contract administrator has no immediate effect. However, the contractor is required to confirm its terms in writing to the architect/contract administrator within seven days.

If the architect/contract administrator does not challenge that notification from the contractor by notice within seven days from receipt of it, then the instruction takes effect on expiry of that seven-day period.

This means that the employer can override the contractor’s written understanding of the instruction, provided it is given within the above time period.

The contractor is required to appoint a full-time competent site manager, approved by the employer, to act as a contractor’s agent. The important point here is that the site manager must be approved by the employer.

Injury, damage and insurance

There is now more flexibility in insuring the works and existing structures, particularly in multi-let scenarios.

A helpful step forward

The new SBC can be seen not as a radical reworking of the previous edition, but rather an incremental and helpful step forward. The precise way in which the various clauses operate will no doubt become the subject of examination by the courts in due course, particularly the payment provisions, which are a recurring feature of construction disputes.

Comments

I'm lost in a fog of documents and amendments, including yours above. How can I / anyone identify which JCT Contract should be used for construction of a single domestic house, by a contractor that I will appoint? The nearest JCT form appears to be the 'Building Contract for a Home Owner / Occupier who has not appointed a Consultant': the path to selection is ambiguous in that (in our case) it is a new build, and not occupied until completion. Maybe a different JCT format is appropriate

Robert Bridges,
7 August 2019

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